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Buying In A Cooler Market

There are plenty of reasons to buy in a cooler market, but often the benefits can become clouded with the fear of overpaying, especially with so much ‘expert’ advice floating around warning people that things will get worse before they get better.

It almost felt like yesterday that crowds would gather at auction and bid desperately, more often than not seeing the price go over their budget and into enormous sums. This created an atmosphere of scarcity and the fear of missing out, resulting in more frantic bidding and overpaying at auction. What it came down to really was peer pressure.

While the situation with sales at auction in 2018 has been a little slower, it’s really more of a return to normalcy rather than a nosedive, and that’s what makes this period such a good time for investors to buy, especially with the Australian government increasing taxes for foreign investors, making the market ripe for Australian investors.

Rather than listening to all the negative noise about the future of the property market, it’s a smart idea to do your research and talk to the independent professionals who are actually working in the market in which you are buying. Currently many people are succumbing to that same peer pressure, only in the opposite direction. If the crowd hesitates, so will I, if they start bidding aggressively, so will I.  It has little to do with the property and even less to do with the current market. Even when, logically, everything looks like green lights; the property is great, the location is perfect and the price is ideal, there is still that feeling of, well if all these people are afraid to buy, something must be wrong.

Some of the misleading information causing a fear to buy comes from optimistic owners still hoping for last year’s prices. Many of the results at auction are actually a refection on the owner, not the turnout or the competitiveness of the bidders. Owners, disappointed when their home sells for what it’s currently worth on the market are saying no sale, and increasing the number of properties passed in at auction and it’s misleading information like this that can lead first-time investors to hesitate on obtaining property in a cooler market.

While there are no accurate ways to see into the future of property sales, one thing is for sure, the ebb and flow of the property market is permanent. These up and down cycles are an inevitable part of investment, which is why it’s critical you are prepared to play the long-term game.

It’s a real mistake to hold off buying in a cooler market because an investment property acquired in a slowdown can really pay off. For a start there is less competition from other buyers, then add in your capital growth you gain while others wait, you have more choice (due to an increase in housing availability and location) and a great price that really shows value for money.

Savvy investors also know that a cooler market gives you more control when it comes to contract negotiations. Owners, looking to push a sale through will be more willing to make amendments and adjustments to the clauses and terms of sale, like settlement times, deposit amount, and attending to defects.

The key is to focus on the fundamentals and watch out for the actual dangers.

Fundamentals

The key elements to focus on are location, land size and infrastructure (schools, public transport, places of employment). These items typically increase in value over time. Elements that have shown to decrease the value over time are busy roads, unusually small property size for the area, poor lighting and small outdoor space.

Actual dangers at auction

Understand that auctions aren’t all they seem to be. Auctions can be manipulated, emotions come into play and perceptions are easily swayed.

For example, it’s often the case that a home that is expected to sell for a low price will, in fact, be one of the most expensive as there are multiple bidders who were committed to a bargain early and begin an aggressive price war.

Before you go to an auction where you intend to buy, attend multiple auctions where you have no interest in the property. Take note of who bids, who doesn’t and what the patterns are. When you know what the industry tricks are and how to navigate them you are less likely to fall into a trap and pay more than the property is actually worth.

Always keep in mind that that the auctioneer and the selling agent have the vendors best interests in mind, they are also very good at what they do, which is enticing people to buy. Resist going with what they say, especially on auction day, they might be the authority in the field but their opinions are biased towards a high price on auction day. Carry out your own research and have reliable, independent advice on hand to help back up your price caps and keep your confidence high right up until the hammer falls.

All is not lost if a property is taken off the market before sale or it passes in at auction. You can still approach the owner with a fair price and reel in a great bargain.

If you are prepared to do the research and disregard the media noise those with courage and smarts can secure a great win with a property purchase in 2019

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